Lenders of Hindustan Construction initiate Rs 2100 cr debt carve-out

Hindustan Construction Company announced that the company's lenders have on 10 January 2020 initiated a carve-out of Rs 2100 crore debt to a third-party-controlled SPV along with certain arbitration awards and claims in a move that will significantly deleverage the company and address its assets-liabilities mismatch.

The debt - along with receivables comprising approximately an award cover of 1.0x and claims under arbitration of 1.5x will move to an SPV controlled by a new investor. The tenure of the debt at the SPV will be up to 10 years and repayments from the proceeds of the Awards will yield an IRR higher than current yields offered by HCC.

The debt-asset carve-out, which will be in the nature of a slump sale, is subject to lenders' final approvals. Lenders aim to seek their internal approvals and target to close the transaction prior to 31 March 2020. The Company will also seek the requisite corporate approvals for the transaction.

Pursuant to the debt carve-out, HCC's balance sheet will stand significantly deleveraged with no debt servicing obligations expected for the next 33 months. HCC will continue to work to realize its underlying assets to further improve its credit profile, allowing it to more substantively participate in India's infrastructure roll-out program.

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